Saturday, April 22, 2017

How Best to Tax Business

Friday, April 14, 2017

How Not to Promote Education

Tuesday, April 11, 2017

A Proposed Regulation

The story about United dragging a passenger off an overbooked plane highlights how crazy the current system is. I would not go so far as to say that airlines should never overbook, but it seems that when they overbook, they should fully bear the consequences. They should be required to keep raising the offered compensation until they get volunteers to give up their seats. If $800 does not work, then try $1600 or $8000. I am sure volunteers will appear as the price rises.

This alternative system would have three benefits:

Those who can delay their travel at least cost will be the first to give up their seats so the allocation of available seats will be efficient.

Those who are delayed will be compensated so won't feel harmed.

The airlines will face better incentives when deciding how much to overbook.

Is something wrong with macro?

Monday, April 10, 2017

The Rich Aren't Getting Richer

This paper by Fatih Guvenen and Greg Kaplan is worth a read by anyone interested in inequality trends. An important excerpt:

Since 2000, different measures of top income inequality have exhibited very different trends. Top income shares based on measures of total income show a continued rise, whereas top income shares based on wage and salary income show no increase in inequality post-2000. The most important difference between these two measures of income is the income that accrues to S-corporations....

But interpreting trends in the S-corporation component is extremely difficult. Feenberg and Poterba (1993), Gordon and Slemrod (2002), and Cooper et al. (2016) warn that much of the recent increase in S-corporation income is income that previously accrued to C-corporations. Such income is not “new” income earned by top earners but is simply income that was previously labeled as corporate income rather than household income.

Sunday, April 09, 2017

My Conversation with Bill Kristol

Monday, April 03, 2017

The Myth of Stagnant Income

Despite the large increase in U.S. income inequality, consumption for families at the 25th and 50th percentiles of income has grown steadily over the time period 1960-2015. The number of cars per household with below median income has doubled since 1980 and the number of bedrooms per household has grown 10 percent despite decreases in household size. The finding of zero growth in American real wages since the 1970s is driven in part by the choice of the CPI-U as the price deflator; small biases in any price deflator compound over long periods of time. Using a different deflator such as the Personal Consumption Expenditures index (PCE) yields modest growth in real wages and in median household incomes throughout the time period. Accounting for the Hamilton (1998) and Costa (2001) estimates of CPI bias yields estimated wage growth of 1 percent per year during 1975-2015. Meaningful growth in consumption for below median income families has occurred even in a prolonged period of increasing income inequality, increasing consumption inequality and a decreasing share of national income accruing to labor.

About Me

I am the Robert M. Beren Professor of Economics at Harvard University, where I teach introductory economics (ec 10). I use this blog to keep in touch with my current and former students. Teachers and students at other schools, as well as others interested in economic issues, are welcome to use this resource.